Borrowing for the Eternally Young — What the Banks Need to do About It
What happens when aging is no longer an issue?
It is becoming more plausible that we could someday solve many of the health issues that come with growing older. For example, take a look at research into senescent cells. These errant cells contribute to diseases like cancer, diabetes, kidney failure and more. New trials have seen huge success in mouse trials and are entering human territory. Drugs that contain the essential protein NAD+, which we produce in lower quantities as we age, are approaching the market. We’re getting close to being healthy for far longer than ever before.
If this were to happen, the implications would be greater than those of any other technological development.
Let’s imagine for a moment that 65 wasn’t the agreed-upon retirement age. What if everyone still lived to about 100, but you could have a productive career for the entirety of that time? Researchers across the globe are looking into ways to increase healthspan, the period of time that we’re healthy, rather than lifespan. Immortality is certainly a possibility, but not one I will be exploring here. I do believe that even if we achieve eternal youth, death will not go away. It could even be legally mandatory if there are resource limitations on our society. For the purposes of this argument, let’s assume 100 is the benchmark age.
Let me preface this article with a disclaimer: I myself am not old.
On the bell curve of people who are alive, I’m to the left on the younger end of millennial. Avocado toast, anyone? For this reason, I’ve always felt I’ve had plenty of time to get my finances together. Working for a bank is a great way to realize that it can be extremely easy to end up working long past the typical age of retirement. So I got my act together.
Have you ever heard of workampers? These are people who leave their homes behind and live in RVs, travelling to find part or full time work. Popular in the U.S, the majority of workampers are elderly people who hunt for enough work to stay afloat. Few people plan on working into their 80s, but it’s becoming a reality for many of today’s seniors. In fact, about 1 in 5 people above the age of 65 are currently working.
With the rising cost of living and social security lagging behind, more people are finding that their retirement savings are disappearing alongside their ability to do meaningful work. For this reason a majority of seniors say they’re more concerned about running out of money than they are of death.
Bankers help their customers prepare for this period of time in their lives. We do this to prevent people from having to become “workampers” or engage in other work to survive. To enjoy your later years, you need money that allows you to travel, experience new things and thrive in your leisure time. “Life starts at 65,” as they say.
There’s a lot of work that goes into optimizing the saving for retirement piece. Options, avenues, tax rules… all to track how much someone would need to scrimp to survive past 100. We could try to solve these problems, but there’s a huge possibility we could solve something else first. I’m compelled to ask:
What would happen to banking if we were to solve the aging dilemma?
I’ll be the first to admit that I doubt I would establish any kind of long-term savings goals if I always had consistent income. The only incentive to amass any large amount of money would be to provide it as inheritance, or to really put the “fun” in “funeral” by blowing it on a giant end of life celebration. Assuming the worldwide standard working a well-paying job for as long as possible, any stored wealth would go to someone who doesn’t need it.
Let’s say I need to make a big purchase. Buy a house, a boat, a robot helper (we’re in the future, here!) or more. Without the need to put money away for later years, I wouldn’t have any reason not to take on debt (assuming I can still pay for my basic needs). The concept of having more than enough time to pay back a loan is common in all age groups, but particularly the younger generations. In the US, 81% of college-educated millennials have at least one long-term loan.
We all know credit can take a long time to recover after a financial disaster. Without the pressure of our retirement and long-term financial health in the mix, the incentive to budget well to pay off debt isn’t there. Financial education is difficult. Most of the drive to be smart with our money comes from the realization that we don’t have all the time in the world to recover.
If people don’t need to save and invest I can’t imagine they would need a bank for the basics of personal financial management. Why store your money if you can spend it on the life you want when you want it? There would be no need to worry about debt because you could always work it off — no matter how bad the interest is. I would lead myself to ruin with that much time.
Given that only 24% of millennials have basic financial knowledge, banks need to learn how to encourage the importance of finances now. The more time people have to do something, the less likely it is that it will get done. The idea of eternal youth would drive procrastination through the roof. We’re more likely to delay a task we feel is painful or unnecessary, or we’ll try to hand it off to someone else.
Banks need to receive that responsibility. They need to position themselves as a trusted partner that understands every unique customer concern.
Banks may need to develop services that will accommodate financial mistakes and errors for longer periods of time. This will be essential to keep customers engaged and happy. Right now, investing the time in financial literacy is somewhat painful and it may not even lead to better financial behavior. Banks need to be trustworthy and offer intelligent services that help people recover faster.
As a caveat, people working longer could have major impacts as a whole, particularly on youth or anyone looking to launch a new career. Today, 15–25 year olds are unemployed at twice the national average and almost a quarter are underemployed (working in a position that is below their qualifications).
Education, particularly a bachelor’s degree, does not carry the weight it used to for employers. The gap between those with and without experience or education is expected to expand to the worst point in human history (if we aren’t already there). Without significant economic growth fueling employment, the refusal to retire could drive youth to extreme measures.
We can’t forget that banks drive necessary industrial and economic growth. Eternal youth would affect individuals, but what about businesses and their operations? Even if people scorn the use of banks and their services in their personal lives, they aren’t quite as replaceable from a business perspective.
Entrepreneurs rely on us to provide them with the capital to start and grow their businesses. Who is going to drive job creation into the future if banks are abandoned or are struggling to stay in the black?
If I had eternal youth, the only reason I could imagine for saving my money would be to fuel the economy myself, either as an angel investor or with my own entrepreneurial venture. In fact, the World Bank forecasts that crowdfunding investments will reach $96 billion a year by 2025. The economy would consist of individuals investing in initiatives they’re passionate about, either directly or through platforms. As an individual, I would love it if I could blow my RRSP on Kickstarters and small businesses.
In this new world banks will need to adapt to secure their place, which they’re well on their way to doing today by looking at innovation that helps deliver value beyond basic personal accounts. Lifestyles and businesses are changing and the financial industry needs to change with them. We may not ever actually cure aging, but we still have to think about the possibility. We may not be healthy forever, but our services need to be.
It has been said that the first person to live to 1000 has already been born. If they’re smart, they’ll realize that’s a lot of time to collect interest.
To learn more about the future of banking, visit www.atbalphabeta.com. Follow Spencer on Twitter @spencer_wishart.
